Millions in buried loot a mystery for authorities

Monday, July 28, 2008

By MATT APUZZO ~ and ALICIA A. CALDWELLThe Associated Press

WASHINGTON — The businessman arrived at the Treasury Department carrying a suitcase stuffed with about $5.2 million in petrified, nearly unrecognizable bills. He asked to swap it for a cashier's check.

Money like this normally arrives after a bank burns or a vault floods. It doesn't just show up at the visitor's entrance on a Tuesday morning.

But Franz Felhaber's banking habits had stopped making sense to the government long ago.

For years, authorities say, he and his family have popped in and out of U.S. banks, looking to change about $20 million in decaying $100 bills for clean cash, offering ever-changing stories:

* It was an inheritance.

* Somebody dug up a tree and there it was.

* It was found in a suitcase buried in an alfalfa field.

* A relative found a treasure map.

That buried treasure stands to make someone rich. It could also send someone to jail.

*

Felhaber is a customs broker. His company, F.C. Felhaber & Co., navigates the customs bureaucracy in El Paso, Texas, where tens of billions of dollars in Mexican goods enter each year.

Felhaber says that is all he was doing with the adobe-looking bundles of money. He said a Mexican relative, Francisco Javier Ramos Saenz-Pardo, sought his help. Saenz-Pardo worried a foreigner with that much money would attract unwarranted suspicion, Felhaber said.

If discretion were the goal, Felhaber went about it all wrong. Rather than making one exchange at the Treasury, Felhaber allegedly began trying to exchange smaller amounts at El Paso-area banks, raising suspicion every time.

In 2005, authorities say he arranged a $120,000 exchange at the Federal Reserve Bank in El Paso, with the money being wired to an account belonging to his uncle, Jose Carrillo-Valles.

Banks normally refer such requests to the Bureau of Engraving and Printing, an arm of the Treasury. The $120,000 exchange was an exception. Investigators say Felhaber wasn't so lucky elsewhere.

Immigration and Customs Enforcement officials say he unsuccessfully tried to get a Bank of America armored truck dispatched to the Mexican border to retrieve the money. Weeks later, they say he gave a fake name at two banks while inquiring about exchanging millions.

Once, the explanation was that he discovered the money while excavating a tree in Chihuahua, Mexico. Another time, the story was that it had been buried in an alfalfa field, investigators say.

Felhaber denies nearly all of this, including giving a fake name. But he is tough to pin down on details. At times he acknowledges helping exchange a $20 million inheritance. Minutes later, he contradicts himself and says there's nowhere near that much. And he has no idea where the money came from.

It's unclear what first caught investigators' attention. Most of the thousands of mutilated money exchanges each year are routine.

Natural disasters create lots of inquiries. Children of the Depression have discovered their attic savings shredded by rodents. Greeting cards stuffed with money are accidentally shredded.

But Leonard R. Olijar, the chief financial officer of the Bureau of Engraving and Printing, said there are warning signs that will trigger investigations. A series of small exchanges, for instance. Or money coming from abroad.

Immigration and Customs agents questioned Felhaber in October 2005.

According to a government summary of that interview, Felhaber said he believed the money came from a Mexican land deal. It was buried in a coffin, he said, until Saenz-Pardo — who brought him the money in the first place — discovered a treasure map.

He now says he was mistaken in his interviews with investigators.

"They take you to your word like you're supposed to remember every single thing every single time," he said.

*

Maybe it was the visit from federal agents, or perhaps someone realized the bank visits weren't working. But the strategy apparently changed.

In January 2006, the Bureau of Engraving and Printing received a package containing about $136,000 from Jose Carrillo-Valles, Felhaber's uncle. A letter explained the money had been stored in a basement for 22 years.

There was no evidence of a crime, just unanswered questions. So the Treasury mailed a check, which Carrillo-Valles deposited.

Yet when authorities followed the money, he and his wife denied knowing about it, according to a government affidavit.

And the $120,000 wired to Jose's account a year earlier from the Federal Reserve? The couple said it was an inheritance.

Authorities don't believe that. They traced a wire transfer from Jose's account to someone named Saenz-Pardo, suggesting that Carrillo-Valles was an intermediary who took a cut of the money and sent the rest to Mexico.

Twice, reporters called Carrillo-Valles. First, he said he spoke no English. When a Spanish-speaking reporter called, he said he could not hear her and he hung up.

The case became a criminal investigation in April 2007. ICE agents called the Justice Department, saying Felhaber had just arrived at the Bureau of Engraving and Printing with $1.2 million.

Finding money is not a crime, but there are rules about its importation. Import documents identified Jose Carrillo-Valles as owning the $1.2 million. Authorities believe that was a lie — a violation carrying up to five years in prison.

But federal prosecutor William Cowden sat on his hands, in case Felhaber tried to exchange even more money.

He did.

This April, Felhaber returned with $5.2 million. Investigators found no import documents this time, a smuggling violation that also carries up to five years in prison.

Prosecutors moved in. Felhaber's Treasury visits gave them probable cause to seize a combined $6.4 million. Authorities told a federal magistrate they suspected it was buried drug money.

Stephen A. Schneider, an Immigration and customs investigator, dismissed every other explanation as "conflicting and cockamamie stories."

*

Even though Felhaber often says he doesn't know where the money came from, he says it's definitely not drug money.

Prosecutors don't accuse him of involvement with drugs. Court documents leave open the possibility that somebody stumbled across a cache of abandoned drug money in the Mexican desert.

Prosecutors plan to seek forfeiture of the seized $6.4 million, giving Felhaber and his family the opportunity to ask for the money back.

If they do, a judge will ask them to sort through the inconsistent stories.